If You’re Worried About “Dynamic Scoring,” Ditch the “Voo-Doo Economics” Argument

dbl pk sun set455a copyFor those of us who think Dynamic Scoring (DS) is a really irresponsible, fiscally dangerous way for the Congressional Budget Office (CBO) to estimate the impact of changes to the tax code, ditch the politically charged “Voo-Doo Economics” (VDE) argument.

Bi- and Non-Partisan, deep skepticism about DS was around long before “Voo-Doo Economics” became a charming epitaph used by liberals to attack conservative economics. Ditch that language. It’s not strictly applicable to DS and will shut down debate even before it starts.

Some recent coverage of the effort by Paul Ryan and House Congressional Republicans to enshrine the practice of DS,  is not especially helpful.  It slips into partisan sounding insult mode, though that may not be the Washington Post’s intent.

DS and VDE are (somewhat) related. Both presume that cutting taxes results in people and businesses spending more, creating more economic activity,  which, in turn, produces more (new) revenue.  There is of course some truth to that.  But with lots of caveats, cautions, and qualifications.

The difference between DS and VDE is that VDE refers to a world view, an all encompassing philosophy about macro economics, sometimes called “Supply Side Economics” or referenced (less kindly) as “Trickle Down.” It’s a mine field for partisan rancor. DS is a kissin’ cousin of VDE, SSE and TD, but its not a grand theory of how economies work.  Why get into an argument where one side is pushed into a corner to defend Ronald Regan and Jack Kemp?

On the other hand, DS just says: “When you ‘score’ a bill that proposes to change the tax code, (please) take into consideration that it will possibly stimulate the economy and produce some new revenue, so that the cost of the proposed policy is somewhat less than measured by the ‘static’ approach.”  The static approach says if you cut the capital gains tax by 10 percent it will result in 10% less capital gains revenue.  Static scoring admonishes the frisky economist to KISS, i.e., “keep it simple, stupid!?”

DS is fiscally dangerous, because it creates the most slippery of slopes and vast opportunities for abuse that can lead easily to bad forecasting, then large revenue shortfalls, budget deficits, program cuts, or even tax increases (to plug the holes).  See Kansas and Pennsylvania. That’s why the CBO and nearly all states stayed away from DS for so long.

Slick marketers, some with real PhDs in economics, working for leading econometrics and finance software giants (like the REMI modelers), started convincing some analysts and politicians a few years ago that econometric models which perform DS have improved greatly.  Yes, they’ve progressed some.  But I would no more bet the U.S. or state budgets on them, any more than I would the family farm (in Brooklyn).

If adopted, DS will inevitably be used as a (Letterman) “stupid pet trick”  that allows (tempts) politicians to say that tax cuts (or spending increases) magically pay for themselves.  Yes, the DS manuever is available to both the tax cutters and spenders.   We have enough stupid pet tricks.

If its not yet clear, the intended take away from this note is: If you want to persuade your legislator or governor to stay away from dynamic scoring, there is no need to challenge implacable,  ideological world views of the economy.  Just stick to basic fiscal prudence.

This post, alas,  lacks some nuance and documentation. An earlier post on this blog was better in that regard. Here it is.


4 thoughts on “If You’re Worried About “Dynamic Scoring,” Ditch the “Voo-Doo Economics” Argument

  1. Kurt

    Interesting that the phrase “Voodoo Economics” was coined by GHW Bush to criticize Reaganomics back when Bush-1 was campaigning against Reagan. Oh the Irony — “Voodoo Economics” originally was a Republican argument against another Republican argument.

    …and then there’s Paul Krugman’s “Voodoo Economics, The Next Generation”:

    * “But facts won’t stop the voodoo comeback, for two main reasons.

    * “First, voodoo economics has dominated the conservative movement for so long that it has become an inward-looking cult, whose members know what they know and are impervious to contrary evidence. Fifteen years ago leading Republicans may have been aware that the Clinton boom posed a problem for their ideology. Today someone like Senator Rand Paul can say: “When is the last time in our country we created millions of jobs? It was under Ronald Reagan.” Clinton who?”

    * “Second, the nature of the budget debate means that Republican leaders need to believe in the ways of magic. For years people like Mr. Ryan have posed as champions of fiscal discipline even while advocating huge tax cuts for wealthy individuals and corporations. They have also called for savage cuts in aid to the poor, but these have never been big enough to offset the revenue loss. So how can they make things add up?”


    So, I guess the lesson is that polite argumentation semantic diplomacy is irrelevant when the underlying motivation is the same regardless of the argumentation tactics; i.e. tax breaks regardless, and any smokescreen will do.

    Cheers, Kurt


    1. Irv Lefberg Post author

      Kurt, Am in basic agreement with you and Krugman on the utter resistance of echo chamber ideology to facts. I’m not at all sure how we get out of this nightmare, without another economic collapse (g-d forbid), this time during the watch of a government controlled by the Ryan world view…..which will respond by cutting taxes more and imposing (not just a mere sequester) but severe austerity, and measures to fight phantom inflation. Then we wil have really hit rock bottom. Then we’ll see a collapse that makes 2007-2009 look like a hiccup. And maybe then, and only then, we’ll start to creep back slowly to sanity. Having said that, I don’t give a blank check to Krugman either. Not sure that doubling or tripling the stimulus would have been wise or that “temporarily” nationalizing the banks, as Dr. Paul proposed, would have been wise under the circumstances. On the other hand, the failure to prosecute criminal activity that contributed to the collapse, and the recent partial repeal of feeble measures (barely) passed to try and prevent another collapse engineered by too-big-to fail institutions, is nuts and deplorable.


  2. Irv Lefberg Post author

    Kurt — thanks for Krugman URL. Will check that out momentarily. And maybe comment further. Yes, Ryan et. al are impervious to the facts. They believe in some sort of utopian Ayn Rand, golden age that is supposed to have existed in here in America at some time, or maybe in african hunter-gatherer societies a million a few millenia ago. My arguments about how to argue about these issues never assume a Ryan or a Kudrow are persuadable . (not in our lifetimes). But I continue to believe there few on the (ever narrowing) fence, and also some good government people with open minds. . Actually on this issue a few of the House folks who wanted to topple Boehner, or someone like that economist who unseated Cantor, would see the supreme irony of doing budget math in a “new” way that makes it a lot easier to blow up the budget and let the debt get totally out of hand. What a circus!


  3. Kurt


    I have the impression that the latest rationalization for “tax cuts” is being framed as just another form of “Voodoo Economics” by the media covering the issue; e.g. Krugman, and Warren, etc.

    It’s interesting that GHW Bush is credited with being the original source of the term “Voodoo Economics.”

    Even Reagan panicked a bit at the debt that he had created with Voodoo Economics. He eventually raised taxes several times, and called for taxing capital gains at the same level as income from wages; basically the principle that income from money should be taxed at the same level as income from work. Less Voodoo in that thinking.

    The folly of Voodoo Economics in Kansas seems to be the most clear current example of it’s failure.

    I have two general strategic reactions to the contemporary use of the term Voodoo Economics:
    1) Today it is used in a more general sense as characterized in the Krugman article.
    2) It’s important to create and adopt shorthand nouns for social problems that mature to the point of being clear and important. Once the process of problem-recognition reaches a certain point then a culturally adopted name – i.e. buzzword – for the problem is smart communications.

    Here are a couple of contemporary definitions of Voodoo Economics;
    1) “An economic policy perceived as being unrealistic and ill-advised, especially a policy of maintaining or increasing levels of public spending while reducing taxation”
    2) “Economic ideas that seem attractive but that do not work effectively over a period of time”

    ONWARD, Kurt



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